U.S. office construction dropped to its lowest level in 14 years in the first three months of 2013 as high vacancy levels discourage developers from getting shovels into the ground, according to Reis Inc. In the three months ended March 31, office completions totaled 1.58 million sq ft.
This figure was down by 45 per cent year on year. It was also the smallest amount since the property research firm started publishing data in 1999. Completions dropped from 2.89 million sq ft in the first quarter of 2012 and 3.35 million sq ft at the end of December.
According to Reis, the slow labour market is a factor affecting the office market. Jobs are simply not being created quickly enough to spark a significant rise in occupancy levels.
Vacancies are 4.5 per cent higher than the low seen in the third quarter of 2007, before the recession began. In addition rents are 7.7 per cent less than the market peak of 2008, according to the firm.
Reis noted in its figures that both asking rents and effective rents (what tenants paid after landlords made any concessions) increased by 0.7 percent in the first three months of this year.
Landlords also had net occupancy gains of just over 4 million sq ft last quarter, which was down from 5.27 million sq ft of net absorption only 12 months ago. Net absorption was 3.32 million sq ft in the fourth quarter.
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